Retirees could see cost-of-living adjustments calculated but not paid due to a 22% benefit cut projected after the OASI fund exhausts in 2032.
Social Security’s Old-Age and Survivors Insurance (OASI) trust fund is projected to deplete by 2032, reducing payroll-tax revenue to 78% of scheduled benefits. While cost-of-living adjustments (COLAs) will still be calculated, they may not translate into actual payments until benefits rise above the 78% cap.
The shortfall stems from insufficient payroll tax collections, currently at 12.4%. Closing the gap would require raising the rate to roughly 16%, an option opposed by 77% of Americans. Retirees relying on annual COLAs—such as this year’s 2.8% increase—could face years without additional payments.
Market implications hinge on reduced disposable income for retirees, potentially dampening consumer spending and economic growth. The uncertainty may also pressure lawmakers to address the funding gap before 2032.